How to Save Income Tax for Salaried and Professionals for FY 2018-19?

We are releasing the eBook on Tax Planning which tells you how to save income tax for FY 2018-19 (AY 2019-20) for both Salaried and Professionals. This is a short 43 slide power point presentation (in pdf) which covers all the tax saving sections and investments applicable for tax payers.

But before that lets look at the changes that happened in Income Tax laws in Budget 2018.

1. Section 80C/80CCC/80CCD

These 3 are the most popular sections for tax saving and have lot of options to save tax. The maximum exemption combining all the above sections is Rs 1.5 lakhs. 80CCC deals with the pension products while 80CCD includes Central Government Employee Pension Scheme.

3. Payment of interest on Home Loan (Section 24)

The interest paid up to Rs 2 lakhs on home loan for self-occupied or rented home is exempted u/s 24. Earlier there was NO limit on interest deduction on rented property. Budget 2017 has changed this and now the tax exemption limit for interest paid on home loan is Rs 2 lakhs, irrespective of it being self-occupied or rented. However for rented homes any loss in excess of Rs 2 lakhs can be carried forward for up to 7 years.

4. Payment of Interest on Education Loan (Section 80E)

The entire interest paid (without any upper limit) on education loan in a financial year is eligible for deduction u/s 80E. However there is no deduction on principal paid for the Education Loan.

The loan should be for education of self, spouse or children only and should be taken for pursuing full time courses only. The loan has to be taken necessarily from approved charitable trust or a financial institution only.

The deduction is applicable for the year you start paying your interest and seven more years immediately after the initial year. So in all you can claim education loan deduction for maximum eight years.

5. Medical insurance for Self and Parents (Section 80D)

Premium paid for Mediclaim/ Health Insurance for Self, Spouse, Children and Parents qualify for deduction u/s 80D. You can claim maximum deduction of Rs 25,000 in case you are below 60 years of age and Rs 50,000 above 60 years of age.

An additional deduction of Rs 25,000 can be claimed for buying health insurance for your parents (Rs 50,000 in case of either parents being senior citizens). This deduction can be claimed irrespective of parents being dependent on you or not. However this benefit is not available for buying health insurance for in-laws.

HUFs can also claim this deduction for premium paid for insuring the health of any member of the HUF.

To avail deduction the premium should be paid in any mode other than cash. Budget 2013 had introduced deduction of Rs 5,000 (with in the Rs 25,000/30,000 limit) is also allowed for preventive health checkup for Self, Spouse, dependent Children and Parents. Its continued to this year too.

6. Treatment of Serious disease (Section 80DDB)

Cost incurred for treatment of certain disease for self and dependents gets deduction for Income tax. For senior citizens the deduction amount is up to Rs 1,00,000; while for all others its Rs 40,000. Dependent can be parents, spouse, children or siblings. They should be wholly dependent on you.

To claim the tax exemption you need a certificate from specialist from Government Hospital as proof for the ailment and the treatment. In case the expenses have been reimbursed by the insurance companies or your employer, this deduction cannot be claimed.In case of partial reimbursement, the balance amount can be claimed as deduction

8. Physically Disabled Tax payer (Section 80U)

Tax Payer can claim deduction u/s 80U in case he suffers from certain disabilities or diseases. The deduction is Rs 75,000 in case of normal disability (40% or more disability) and Rs 1.25 Lakh for severe disability (80% or more disability)

A certificate from neurologist or Civil Surgeon or Chief Medical Officer of Government Hospital would be required as proof for the ailment.

9. Physically Disabled Dependent (Section 80DD)

In case you have dependent who is differently abled, you can claim deduction for expenses on his maintenance and medical treatment up to Rs 75,000 or actual expenditure incurred, whichever is lesser. The limit is Rs 1.25 Lakh for severe disability conditions i.e. 80% or more of the disabilities. Dependent can be parents, spouse, children or siblings. Also the dependent should not have claimed any deduction for self disability u/s 80DDB.

To claim the tax benefit you would need disability certificate issued by state or central government medical board.

You can also claim tax exemption on premiums paid for life insurance policy (in tax payers’ name) where the disabled person is the beneficiary. In case the disabled dependent expires before the tax payer, the policy amount is returned back and treated as income for the year and is fully taxable.

40% or more of following Disability is considered for purpose of tax exemption

The government encourages us to donate to Charitable Organizations by providing tax deduction for the same u/s 80G. Some donations are exempted for 100% of the amount donated while for others its 50% of the donated amount. Also for most donations, the maximum exemption you can claim is limited to 10% of your gross annual income. Please note that only donations made in cash or cheque are eligible for deduction. Donations in kind like giving clothes, food, etc is not covered for tax exemption.

How to Claim Sec 80G Deduction?

A signed & stamped receipt issued by the Charitable Institution for your donation is must

The receipt should have the registration number issued by Income Tax Dept printed on it

100% tax deduction is allowed for donation to a political party registered under section 29A of the Representation of the People Act, 1951 u/s 80GGC. The maximum exemption you can claim is limited to 10% of your gross annual income

Along with the tax saving sections and investments for both salaried and business, it also has details about all the common salary components and their tax treatment. This section can help you to plan your salary components in case your company offers such facility.

We hope that this eBook (in pdf/ppt format) would help you in understanding, planning and saving taxes.

You have described each and every step in detail along with easy to understand way. It is an art and experience that you have. I downloaded the ebook. It is very useful for me. Thanks to sharing your expertise with us.

My mother is a house wife of age 62 & his husband, i.e. my father is a retired man at monthly pension of rs 2000/-. No any other source of income of her. Now if she want to sell a house (LIG) which is in her name at Rs. 9 Lac. I bought this house in her name 4 yrs back at the cost of Rs 5.15 Lac incl. registry charges. Now Kindly tell me that how much TAX I will have to pay on behalf of her. The said property is mortgage in bank. I want to clear the loan of Rs. 7.20 Lac by selling this House. So, Is there any clause under which I can pay the loan with giving any tax. Pl. pl. reply. it is urgent. Thanks Regards Gopal Manikpuri

You did a commendable job by curating this amazing list. However you won’t deny that there are lot more ways to save taxes. So I have created a list of 50+ ways to save taxes in India. Here’s the link to that post: https://smartlyrich.com/50-ways-to-save-income-tax-in-india-2018-2019/

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Disclaimer

The website is not affiliated to any company, agent or brokers for selling/ recommending investments. All the information in the blog is for educational and informational purpose only. Please consult a qualified financial planner and do your own due diligence before making any investment decision.